KPN dials up a new digital strategy  

17 March 2017:

It’s not easy being agile when you’re a telecommunications provider. Your value proposition is based on the efficient management of large, complicated, interconnected systems. Your customers expect 100 percent uptime, which can make it risky to experiment with new technologies and innovations. KPN, a service provider based in the Netherlands, several years ago began deploying digital technologies and processes and is now finding some early success with agile methodologies. Leon Bedaux, head of digital IT at the company, says it was important to have IT and business leaders jointly kick-start a comprehensive technical and cultural transformation “to ensure the flexibility of the full organization.” In this conversation with McKinsey’s Arnoud Rozendaal, Ruben Schaubroeck, and Naomi Smit, Bedaux describes how the company is organizing this transformation.

McKinsey: What prompted the shift to agile? What challenges was KPN facing?

Leon Bedaux: At a broad level, we realized that we were competing not just with other telcos but also digital-native companies. Their attempts to engage our customers drove up our customers’ expectations about our own digital capabilities. We were spending a lot of money trying to keep up, but we continued to lack speed, flexibility, and a strong customer focus. We were overly dependent on our sourcing partners; a lot of our resources were located on a different continent, far away from the business. In the meantime, we were often delivering services over budget and not always meeting the needs of the business. We decided the only way to change this was to look at agile methodologies, and part of that was insourcing knowledge and bringing the developers closer to the business again.

McKinsey: You started insourcing at a time when there was a strong focus at KPN on cost reduction, especially in IT. How did you get the support to bring full-time employees back into the fold?

Leon Bedaux: You’re right, this was no time to ask for extra money. Fortunately, we didn’t have to. KPN’s digital initiatives have never been totally about cost; they’re about the added value we can deliver to customers. So we emphasized with the board that cost containment and simplification in IT would allow us to dramatically improve customer experiences. We could provide better service with virtually no additional cost. Also, we moved all of our applications to digital open-source technology, which helped us cut our run rate in half while delivering the same output. Our overhead is lower, and we’ve automated virtually everything, so our developers can spend about 90 percent of their time on software rather than on other non-value-adding tasks.

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Source: McKinsey & Company

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